7TH MAY 2012

Why Do I Keep Talking about Dividends again and again and again??? I first recommended Going Long the Dividend High Yielders in January of this year. See HERE http://www.scribd.com/doc/82865565/Bse-Notes-Jan-2012 I then advised Caution in February because the Market had run up too fast See HERE http://www.scribd.com/doc/82867756/Bse-Notes-Feb-2012 And then I finally spoke about the Decisive Out-performance of the Dividend High Yielders till 31 st March 2012 See HERE http://www.scribd.com/doc/87868739/Dividends-High-Yielder-Out-Performance-Continues-31st-March-2012 The Market The Final Judge, Jury and Executioner has Spoken Out Loud and Clear. The Dividend High-Yielders List continues its strong out- performance this Year. A Portfolio built out of Only Dividend High-Yielders would have decisively Out-performed the Wider Sensex This Year once again continuing the Trend that has been in place since November 2009. THIS ROCKET CONTINUES TO BLAST OFF!!! 48 stocks are up more than 40% and the Stocks IVRCL(100% UP),VST INDUSTRIES(84% UP), DENA BANK(78% UP), IFCI(70% Up) and BGR Energy have gone up like rockets(68% UP)!!! Other Big Gainers include Bajaj Steel, HEXAWARE TECHNOLOGIES, INDIABULLS FINANCIAL SERVICES, TORRENT CABLES, SOBHA DEVELOPERS, HONDA SIEL POWER PRODUCTS,etc(All Up 50% or more).

If you applied a Filter to my Dividend High Yielders List back on 1st January 2012;so that you bought only those stocks which would Yield in excess of 2%;you get over Two Hundred stocks. The Average Gain on those Stocks is 20.44 %( Way Superior to the Sensex which is up only 8.6% in that time period) and the Average Dividend Yield is 3.7%. Of that list there are only eight stocks which are down significantly (more than 10%) Gujarat Gas Company (DOWN 17%) SRF LTD (DOWN 13%) ALCHEMIST (DOWN 31%) TITAGARH WAGONS (DOWN 16%) LKP FINANCE (DOWN 21%)

ICSA-INDIA (DOWN 15%) OPTO CIRCUITS INDIA (DOWN 11%) RPG LIFESCIENCES (DOWN 18%) More importantly even today there are 160 stocks which are yielding in excess of 2%. Not Happy with these Gains & the Yield??? If you applied a Filter to my Dividend High Yielders List back on 1st January 2012; so that you bought only those stocks which would Yield in excess of 4%; you get over a Hundred stocks. [Not an Approach I recommend as you miss out on some really Amazing Stocks which Yield between 2 and 4%] The Average Gain on those Stocks is 20.8 %( Again Way Superior to the Sensex which is up only 8.6% in that time period) and the Average Dividend Yield is 5.07%. Of that list there are only FOUR stocks which are down significantly (more than 10%). Gujarat Gas Company (DOWN 17%) SRF LTD (DOWN 13%) LKP FINANCE (DOWN 21%) ICSA-INDIA (DOWN 15%) More importantly even today there are 98 stocks which are even today yielding in excess of 4%. I know its still early days but from the stocks that are on my list today, the Picture on Dividends has just gotten better and better.[We will get a full and clear idea only by the end of June when more than 75% of the companies on the BSE would have paid out their entire Dividend Payout for 2012] Of the 166 stocks that have paid full or Partial Dividends for 2012 already, only 17% have cut Dividends this year. 56% of the Stocks have raised Dividends so far this Year. When you look at it simply, the reasons are for this Out-performance are simple-Investors everywhere like a Degree of Predictability about their Returns. And what better way to get this Predictability than through Assured Annual Dividend Payouts? When you see such a Decisive out-performance for such a Simple Model(we consider only One Criteria here-Dividends) and still return More than Twice as much as the Broader Sensex and with much-much less risk (since you will always pocket the Dividends) ;you know you need to relook how you invest in the Stock Market today. Specifically, Debt-laden stocks which have not paid Dividends of atleast 2% annually for the last Three-Five years straight should be simply rejected outright. Regards Ashish.Ulhas.Mehta Email:technoconsulting4smbs@gmail.com

P.S I would like to elaborate on some Key Issues/Questions which most my Friends often talk/ask me about regarding Dividends, Investing, etc 1) All Data used here is current as of 5th May 2012.You can find it HERE http://www.scribd.com/doc/92593690/Bse-Dividend-High-yielders-List-as-on-5th-May-2012 2) I have taken into account the Assumption that the Dividend Payout (in those cases where 2012 payouts have not yet been made) in 2012 is the same as in 2011.As I have explained earlier that basically underestimates Total Returns. 3) Anyone reading this Newsletter has less than Rs 5 Crores Total Capital to invest in the Stock Market. 4) For simplicity sake, I have assumed that the Investor will Buy the same Number of Shares of all Stocks at the same time (1st January 2012).For arguments sake, if the Investor would have restricted his/her purchases to only the 4% Yielders that would mean that in January he would have purchased stocks of 125 different Companies and all of Equal Quantity. Lets say he Purchases 10 shares of each Stock; his Total Investment in January would have been Rs 203550(not including Commissions and Taxes). This is by far the simplest and easiest way of Investing in the Dividend High Yielders without taking into account any other factors.(Its exactly how ETFs invest in Stock-Markets). You want to improve your returns here even further (by cutting out the Losers)??? Then you look at how the Dividend Payout has changed over the Last Three-Five Year Time period. Look only for those stocks which increased their Dividend Payouts over this Time Period. If they keep increasing their Payouts Annually it shows that the company is not only Profitable but is interested in sharing its Profits with all Shareholders. In addition you can also look at the latest Quarter on Quarter Results and the latest Half Year on Half Year Results [Have Profits stayed Constant/ Increased] over these respective Time periods? If yes, then Invest, else expect a Dividend Cut to come in. Additionally you can also see Trailing PE Ratios; where you should primarily look at Average PE Ratios for atleast 3-5 year periods to Minimize the chances of getting put off by One-off Spikes. 5) I dont see any Famous Names in the list of Dividend High Yielders which have done very well? This is a very common question that I get a lot. By Famous, I think you mean Large-Cap stocks which are extremely liquid and Trade every single day in Thousands and maybe even Millions of shares. If thats the case, You are Right and thats because you as an Investor should not forget that this is Not a Young Bull Market. We are now in the 3rd Year of the Bull Market (started in March 2009) and by this stage most Large-cap names have already been priced to perfection (including expected Growth rates for atleast the next Two years or so).To find an Under-Valued stock here is very difficult, simply because the Market is brutally efficient here. In contrast in the Mid-Cap and Small-Cap space its easier to find Undervalued Quality stocks which pay excellent Dividends Year after Year after Year. Which brings me to my next point and Question I often get asked

6) Isnt Investing in the Mid-Cap and Small-Cap space is Risky? To the person who asks this question-I want to ask Two Counter-Questionsa) Are you an Investor or a Speculator? I define Investor as someone who is prepared to buy and Hold a Stock for atleast one Year (and preferably even longer) Duration. If you want to speculate then this philosophy of Dividend Investing does not apply to you. What you are doing is equivalent to Gambling your Savings away based on a He said/She Said model. b) How do you Define Risk? Is investing your entire Stock portfolio in one stock riskier or investing equally in 20 stocks? Similarly, is investing your entire Stock portfolio in one sector riskier or investing equally in different sectors? If you hold say 10-1000 shares of a company does it really make much difference whether you invest in a Large-Cap or a Small-Cap? Frankly speaking, it doesnt. So dont expect your Investments to move the markets. As a Small Retail Investor (anyone who has a Stock portfolio of Less than Rs 5 Crores); No matter what happens, You will always be a minority Investor so use your Size to your advantage. Remember whenever a particular Stock you invest in turns for the worst(because of some adverse effect or the other), its easiest for the little Guy to sell and exit then it is for someone who holds say a Million or so shares without swinging the market either ways. I have done enough studies, run enough mathematical Models and at the same time have considerable practical experience in this Area. If you never put more than 5% of your Total Capital at risk in anyone Company and no more than 25% in one particular Sector you will always do well in Bull Markets inspite of the inevitable setbacks that do occur along the way. Otherwise, how can you explain that inspite of having Eight very big losers, the 2% Portfolio still returned more than TWICE as much as the BSE Sensex? This Diversification is the Key to building a constant and Strong portfolio of Dividend High Yielders with Increasing Yields year after year after year. Dont expect your Broker or Mutual Fund Manager to explain any of these key issues or tell you that the Dividend High Yielders out-perform the Sensex consistently (This is the case on the S&P 500 also). Why is that? My brother calls it the Paapi Peth syndrome. Simply put More often than not these guys put their Interests above yours. But think about it, heres one ordinary Retail Investor putting in place a Dumb Model with only One Criteria -Dividends and hes able to decisively out-perform the Sensex. So shouldnt you expect some level of out-performance from your Mutual Fund investments too??? This is where I want you to go back and look at your various Mutual Fund Holdings. Have they returned atleast 10% this Year, excluding Dividends? [Taking into account a 2% Fund Management Fee, that basically returns as much as the Sensex only]

If they havent its time To Change Managers. Do not forget its your hard-earned Money on the line here. You have every right to expect and demand Out-performance. DISCLAIMER: I do not work for any of the following organizations A Mutual Fund, Investment Bank, Bank, Analyst Firm, Brokerage House, Any Government or any other related firm with links to the Financial Services Industry. I am a retail investor and I write because I Love writing about Finance and Economics. Please do your own due-diligence before investing anywhere.

ORIGINAL DOCUMENT CAN BE FOUND HERE http://www.scribd.com/doc/92746711/Dividends-High-Yielder-Out-Performance-Continues-5TH-MAY-2012